The Economics of Bail

Elon Bachman (@ElonBachman) has some thoughts on the bail bonds industry.  He specifically took a look at the economics of bail bonds.  His main point is that there are two groups that try to apprehend bail jumpers: law enforcement and bail bond issuers (“bounty hunters”).  I have to add the caveat that the police have many other things to do while bail bond issuers can devote their entire attention to catching the bad guys.

Bail bonds office The Economics of Bail Bonds

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An Overview of the Bail Bonds Market

For those who don’t understand the bail bonds industry, here’s a quick overview.  If arrested, you may be released if you can post bail.  Suppose the court sets your bail at $10,000.  You call your friendly local bail bond office.  You put up 10 percent of the bail amount ($1,000).  The remaining $9,000 is posted by the bail bond company.  In return you promise to appear for your scheduled court appearance.  If you fail to appear, the bail bondsman can use just about any method to apprehend you (including shooting you).  Don’t jump bail.

There is a powerful incentive for the bail bond issuer to hunt you down.  If you don’t appear, their $9,000 will be forfeited to the court.  If that doesn’t sound like much to you, add one or two zeroes to my example. There is no incentive at all for the police to undertake this task.  In face, since apprehending bail jumpers takes time, the incentive may be negative depending on the value of the other activities that can be chosen any individual officer.

Elon’s Analysis

Here’s Mr. Bachman’t take on this interesting industry.

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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.